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The Tort Plague Hits Wal-Mart
Steven Malanga
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A federal judge dignifies a flimsy claim.

In June, a San Francisco federal judge ruled that a lawsuit by a handful of female Wal-Mart workers should be transformed into a massive class action case on behalf of 1.6 million women who worked at Wal-Mart over the last eight years. In rendering his decision, Judge Martin Jenkins called the case “historic.”

But critics of our civil justice system wouldn’t call the case “historic” so much as sadly typical of current U.S. employment law. The suit is based on individual cases that reveal little more than the frustrations of underperforming or unpopular workers, backed up by dubious statistical analysis and tortured logic that binds together contradictory arguments by the thinnest of threads.

The case began as individual claims, which the legal team, led by the trial firm Cohen, Milstein, Hausfeld and Toll—specialists in suing big companies—has fought to elevate into a class action to try to win big bucks from Wal-Mart. To read the complaints behind the original suits is to realize how employment law has degraded to the point where disgruntled workers regularly claim discrimination and sue, based on nothing more than the fact that they have not been promoted.

The first plaintiff listed in the case, Betty Dukes, testifies that she clashed with a female Wal-Mart supervisor and was disciplined for admittedly returning late from lunch breaks, but nonetheless claims that Wal-Mart passed her over for promotions because she is a woman, though she offers no evidence. The suit’s second plaintiff, Stephanie Odle, was a management trainee, denied promotion after being suspended for what her supervisors say was improper handling of a customer refund. She claims, also without evidence, that the suspension resulted from sex discrimination. While other cases involve accusations by women that supervisors, including female supervisors, made disparaging remarks about women workers—something quite possible in a firm of more than 1 million employees (and individually actionable)—there’s nothing in these anecdotes that adds up to a company-wide pattern of discrimination.

Yet since these cases rest on little evidence of actual discrimination, the plaintiffs must show that what has happened to them does represent a pattern of company-wide abuse. Their arguments should deeply disturb the average corporate executive. Central to the plaintiffs’ case is the contention that Wal-Mart is a heavily decentralized company, in which managers enjoy wide latitude to make hiring, pay, and promotion decisions. This, the lawyers argue, leaves too much discretion in the hands of store managers, who can thus be influenced by their own stereotypes.

In this scenario, decentralization in management—one of the key productivity-boosting principles of U.S. business in the last two decades—is something that firms must avoid or limit. The plaintiffs’ lawyers even quote disapprovingly a Wal-Mart manager who says he relies on “teamwork, ethics, integrity, and the ability to get along with others” in making promotions. “Such unwritten, subjective criteria,” the lawsuit states, “are particularly vulnerable to the influence of stereotypes.” Only in the moral netherworld that many plaintiffs’ attorneys inhabit today would “ethics” and “integrity” be seen as “subjective” criteria to be avoided in hiring or promotions.

Decentralization isn’t sufficient to prove company-wide discrimination, so the plaintiffs’ team also argues, contradictorily, that Wal-Mart’s strong corporate culture sends subtle messages to managers not to promote women. To gin up this argument, the lawyers rely on anything that purportedly shows that Wal-Mart’s “culture” is hostile to women, including the fact that Sam Walton would take his top managers quail hunting once a year—an activity, the suit contends, that men are more comfortable with than women.

The plaintiffs also employ statistics in an attempt to show discrimination patterns, claiming, for instance, that Wal-Mart’s percentage of female managers is far lower than its percentage of female hourly workers. Wal-Mart counters that women apply for management jobs at a lower rate than men and that it actually promotes its female applicants for managerial jobs at a higher rate than it does male applicants. If logic applied in civil courts today, end of discussion. But in the emotionally charged world of discrimination lawsuits, where banks face redlining charges if their loans don’t reflect the demographic makeup of the population (regardless of the lack of creditworthy candidates in some neighborhoods, or other inconvenient facts), Wal-Mart can be considered guilty simply because its numbers don’t meet some arbitrary standard.

With the plaintiffs making such a flimsy case, the judge would have had to bend over backward to accept this as a class action, and that’s just what he did. He admits the contradiction in describing a corporate system as both excessively subjective and at the same time centralized, but like an acrobat on a high wire he argues that there’s just enough subjectivity in Wal-Mart potentially to create bias, but just enough central control possibly to justify a corporate pattern. Solomonic evenhandedness this isn’t.

The judge also credulously accepts the most subjective expert testimony provided by the plaintiffs on Wal-Mart’s corporate culture. He cites the testimony of University of California sociologist William Bielby, who found Wal-Mart’s “diversity” policies wanting, because the company “has never performed any survey addressing gender or diversity issues.” In other words, it’s not enough today to hire and promote based on the qualifications and achievements of your workers; a firm is potentially guilty of discrimination for not taking surveys of gender issues. Reading the judge’s section based on such voodoo sociology should strike fear into any company unlucky enough to come before him on employment matters.

That the case against Wal-Mart is so flimsy isn’t surprising. Since Wal-Mart became America’s largest company, it has also become the most sued. Trial lawyers have set their sights on the firm’s deep pockets, aided by scores of unions and left-wing advocacy groups, whose barrage of negative publicity about the company aims to force it to unionize and to soften up public opinion for a big payoff in court. These groups have waged war on Wal-Mart because the firm’s technological and management innovations have helped create a productivity revolution that has threatened organized labor and challenged some of the Left’s economic orthodoxies. The groups have argued to a receptive press that Wal-Mart’s focus on low prices and high employee productivity imposes a high cost upon the economy. Lawsuits like the current one can only succeed if the groups convince enough Americans that there’s something insidious in offering a vast range of products at low prices to U.S. consumers.

But the first red flag in the discrimination case should be the legal team itself. Spearheading the case is a lineup that has become typical in employment suits against major companies these days: an alliance between a noted (critics would say notorious) plaintiffs’ firm specializing in employment law—Cohen, Milstein—and nonprofit, left-wing advocacy law projects like the Impact Fund. This kind of combo has proven effective, because the plaintiffs’ firm can supply the litigation muscle needed to pursue a suit like this over the years, while the legal foundations—supported by contributions from Cohen, Milstein itself and other trial firms—supply the patina of supposedly disinterested respectability and public service that magically turns these into “historic” cases with redeeming social value.

Indeed, Cohen, Milstein needs just such respectable company if it is to appear as a defender of the little guy. This, after all, is the firm that ignited the uproar over discrimination at Texaco by releasing tape transcripts purportedly showing that the company’s executives made ugly remarks about minorities, only to have it revealed much later (after Cohen, Milstein pocketed a huge settlement) that the tapes had been mistranscribed and the Texaco execs had made no such statements.

Unfortunately, the only thing “historic” about this case is that it represents yet another step in the debasement of U.S. employment law.

 

 


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